Central Excise – Valuation – fad with freight – Place of Removal – Revenue far removed from Reality
REVENUE seems to be having a love for realising Revenue on freight. They have been fighting hundreds of cases in all appellate forums to get that extra pie of excise duty on transport charges. Right from the Supreme Court down to some rare ‘reasonable' Commissioners, everyone had been repeatedly telling them, “your duty is on manufacture, not transport” – but they don't listen. Whatever you write in your Rules, the fact remains that you cannot simply levy excise duty transport charges.
In this latest case, which we bring you today, they not only as usual ended up losing the appeal, but also were to pay the costs.
One reason for such frivolous appeals even after the issue had been settled long ago is, ‘the Revenue thinks they have no costs for litigation'.
Have a look at some decided cases of the Supreme Court.
BOMBAY TYRE INTERNATIONAL LTD -
Where the goods are sold by the assessee in the course of wholesale trade at a place or places outside the factory gate, the assessee will be entitled to a deduction on account of cost of transportation of the excisable article from the factory gate to the place or places where it is sold. The cost of transportation will include the cost of insurance on the freight even where such freight is charged on average basis so that the wholesale cash price from any place or places outside the factory gate is the same as the wholesale cash price at the factory gate, the average freight included in such wholesale cash price has to be deducted in order to arrive at the real wholesale cash price at the factory gate and no Excise duty can be charged on it.
SHIVA GLASS WORKS -
As regards the transportation charges, it is clear that the transportation charges have been levied for the journey from the factory gate. They have been equalised and applied irrespective of the distance covered by the marketed goods from the factory gate and also without regard to the weight of the goods. Equalisation of freight should make no difference to the claim for deduction so long as the transportation charges are imposed in respect of the journey of the goods beyond the factory gate.
MADRAS RUBBER FACTORY LTD -
Where the sale is effected at the factory gate, the several expenses mentioned including “charges for other services after delivery to the buyer, viz., after-sales service and marketing and selling organisation expenses cannot be deducted” from the price and (ii) where the sale is effected through the assessee's sales organisation at a place or places outside the factory gate, even there the aforesaid expenses cannot be deducted. The assessee, however, will be entitled in such a case to deduct the cost of transportation (including the cost of insurance on the freight) incurred for transporting the goods from the gate to the place of delivery.
BARODA ELECTRIC METERS LTD -
Since the duty of excise is a tax on the manufacture and not a tax on the profits made on transportation, the excess amount collected by way of freight and transportation charges would not become part of assessable value.
ESCORTS JCB LTD -
The place of removal of goods is factory premises since the transaction of sale, payment of price and handing over possession of the goods to the carrier after clearance is at the factory.
Why is the Government so determined to collect that excise duty on transport charges, when their job is to collect excise duty on goods manufactured? This fad is extended to ridiculous levels where in Service Tax, outward transport is considered to be input service only if the cost of transport is included in the assessable value and the concept of ‘Place of Removal' is exported into service tax causing utter confusion.
Please see Breaking News for an important Supreme Court judgement we are carrying today.